CNX Resources Corporation (NYSE:CNX) Q3 2023 Earnings Call Transcript

CNX Resources Corporation (NYSE:CNX) Q3 2023 Earnings Call Transcript October 25, 2023

CNX Resources Corporation beats earnings expectations. Reported EPS is $0.35, expectations were $0.26.

Operator: Good morning. And welcome to the CNX Resources’ Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations. Please go ahead.

Tyler Lewis : Thank you and good morning to everybody. Welcome to CNX’s third quarter conference call. We have in the room today, Nick DeIuliis, our President and CEO; Alan Shepard, our Chief Financial Officer; Navneet Behl, our Chief Operating Officer; and Ravi Srivastava, President of our New Technologies Group. Today, we will be discussing our second quarter results. This morning, we posted an updated slide presentation to our website. Also detailed third quarter earnings release data such as quarterly E&P data, financial statements and non-GAAP reconciliations are posted to our website in a document titled 3Q 2023 Earnings Results and Supplemental Information of CNX Resources. As a reminder, any forward-looking statements we make or comments about future expectations are subject to business risks, which we have laid out for you in our press release today as well as our previous Securities and Exchange Commission filings.

We will begin our call today with prepared remarks by Nick followed by Alan, and then we will open the call for Q&A where Nav and Ravi will participate as well. With that, let me turn the call over to you, Nick.

Nick DeIuliis: Thanks, Tyler. Good morning, everybody. Third quarter of 2023, marks our 15th consecutive quarter of free cash flow generation, despite experiencing what I would call, extremely challenging in basin pricing, and our continued execution of our long-term strategy, which started back in 2020. It’s generated approximately $1.8 billion in free cash flow. It’s reduced outstanding debt by approximately $385 million. And it’s allowed us to repurchase and retire 31% of our outstanding shares at deeply discounted prices. It remain on pace to exceed our original goals supported by our sustainable business model that has and will continue to generate significant long-term per share value for our owners. And all that might sound like a broken record, because we’ve been stringing out this theme for these metrics for a couple of years now, which is sort of the point.

And that’s the consistent execution and clinical capital allocation, these things drive the creation of meaningful for share value over the long-term. During the quarter, our operations team, it continued to execute efficiently. In fact, the team has been successful in further improving cycle times and accelerating activity, and Alan will go into some more of those details in a minute and how it impacts our full year production outlook and capital timing. More specifically, one thing I’d like to highlight during the quarter, is that we brought online four new wells beneath the Pittsburgh International Airport’s runway. And these latest wells highlight our public-private partnership with the airport. And we achieved this by the way with zero safety incidents and zero environmental impacts.

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Q&A Session

These four new wells are projected to generate almost $70 million in royalty revenue for the airport through 2042, and about $20 million of that will be over the next four years. And this is on top of a similar amount of royalty revenue that the airport’s already received from our partnership that was created back in 2013. So our historic partnership with the Pittsburgh International Airport is created a sustainable fuel hub, utilizing locally sourced lower cost lower carbon intensity natural gas. And it’s a perfect example of our Appalachia first vision driving tangible results. Let’s shift now to the New Technologies Group, very exciting part of our business. And we continue to expect around $75 million, with up to potentially $100 million in free cash flow in 2024 associated with the New Technologies Group.

We’re just getting started with New Tech, and we think this business has the potential of being an even bigger, free cash flow growth driver for the company moving forward. The near term New Tech free cash flow growth is through our ability to monetize environmental attributes, tied to our waste methane abatement operations in Virginia. And our New Tech effort is poised to lead the charge into the hydrogen economy with the atoms for clean ammonia project, where we expect to provide ultra-low carbon intensity feedstock and carbon capture and sequestration services. The DoE recently announced the funding of this project as part of the ARCH2 Hydrogen Hub application. And while we certainly applaud the funding announcement and inclusion of ARCH2 in the award, we’re also eagerly awaiting implementation guidance regarding the related hydrogen production tax credit, or the 45V provision of the IRA.

And that’s going to materially impact the project economics. So the intent of the hydrogen production provision of the IRA, of course, was to incentivize the creation of low carbon intensity hydrogen, and to reduce emissions, and to enhance U.S. energy security, and to create jobs and economic activity and energy communities. And I’ll tell you, the Adams Fork project squarely aligns with all those objectives. So we’re monitoring developments with the 45V guidance closely. And we’re hopeful that DC will follow the intent of the law, and help us make this important West Virginia project and others like it, frankly, a reality. Also I’d like to highlight that we reached our 2023 methane emission reduction target of 70,000 tons of carbon dioxide equivalent by the end of the third quarter of this year, which was awesome.

So that, of course is a quarter ahead of schedule, and our team is still hard at work with regards to making further adjustments and improvements to reduce emissions further. Great accomplishment by our regulatory reporting and operations teams. And by the end of this year, we expect the cumulative effects of our reduction efforts to reduce methane emissions on a carbon dioxide equivalent tonnes bases by about 49% since 2020, so almost a 50% reduction in a very short period of time. Our methane reduction goals for 2023 were focused mostly on pneumatic devices and liquids unloading, those were the two biggest opportunity sets. And we invested $7 million of capital for specific projects. And the team’s got the work, a year-to-date, we’ve changed out over 700 pneumatic devices.

And they came in at a cost, the low-cost actually a very sort of competitive one, it’s $3 of CO2 equivalent per tonne. And we now plan to add an additional 160 or so devices to our plan for the rest of the year, because we’re ahead of schedule, due to that fantastic pace that the team has set. And in addition, the team has been working on our liquids unloading processes, as I just mentioned, which also contributes significantly to our methane emission reduction of the 70,000 tonnes of CO2 equivalent. So we set a difficult, but yet achievable targets, and we do what we say we’re going to do. So we’re not going to be in the game, you’re not going to see this from us of setting goals that are decades away to sort of avoid accountability. Our focus is always going to be on the tangible and the impactful and the local type of actions.

Now, last, but certainly not least, we continue to have conviction that our shares are materially undervalued. During the quarter, we bought back an additional 1% of our shares outstanding. Our compound annual growth rate or CAGR for our share repurchase program over the past three years, since the peak share count around third quarter of 2020, is approximately negative 11%. And we think that’s top tier across the capital markets. And it compares favorably to the classic, best-in-class share repurchasers, like AutoZone is an example, where AutoZone has retired shares at about a minus 8% CAGR over a 25-year period. So we believe that our share repurchase program provides an opportunity to create incredible value for our long-term, like mind — like-minded owners, who are going to benefit as their per share value continues to grow meaningfully over the coming years.

Now, let’s hear from Alan.

Alan Shepard : Thanks, Nick and good morning to everyone. As Nick mentioned, this quarter represents the 15th consecutive quarter of free cash flow generation through the execution of our sustainable business model and long-term strategic plan. The quarter we generated approximately $19 million in free cash flow, despite the challenging price environment. As we initially laid out our free cash flow plan in the first quarter of 2020, this brings our cumulative free cash flow to approximately $1.8 billion, or around 50% of our current market cap. Looking ahead, we expect this quarter to mark the trough of our free cash flow generation, as the confluence of lower capital, higher expected gas pricing and growth in our New Tech cash flows, solidifies our confidence in achieving robust free cash flow generation in the quarters ahead.

We continue to believe that our shares traded at a significant discount to their intrinsic value and as such during the quarter bought back an additional 2.4 million or 1% of shares outstanding and an average price of $19.50 per share. And after the close of the quarter through October 12, we bought back an additional 1 million shares and an average price of $22.20. Since the third quarter of 2020, we’d have now bought back approximately 31% of our total shares outstanding at an average price of $15.58. An exceptional result not just in our industry anywhere in the capital markets, and we believe those results will only become more impressive as we’re well positioned to continue to take advantage of this opportunity moving forward. Turning briefly to the balance sheet, our significant maturity runway and robust hedge book continue to be key components that underpin our capital allocation flexibility.

Given these two elements, combined with our low-cost position, we remain comfortable with our current leverage profile and have the luxury to remain opportunistic with respect to our debt management. Furthermore, we believe that the growth of the New Technologies Group over the next two years will result in the lower leverage ratio even before considering potential further reductions in absolute debt. Speaking of the New Technologies Group, it continues to deliver tangible results in both positive free cash flow and environmental impact. During the quarter, we recorded approximately $13 million in free cash flow primarily associated with sales and environmental attributes from our waste methane capture activities, which brings our year-to-date free cash flow from New Tech to approximately $19 million.

Further, as Nick mentioned, we continue to have good line-of-sight to the New Technologies Group contributing approximately $75 million to $100 million in free cash flow in 2024. As we said last quarter, free cash flow from New Tech has the potential to be meaningfully higher in the years beyond 2024. Let’s now shift to the updated guidance outlook. Broadly speaking, we are reaffirming the 2023 and initial 2024 guidance that we updated last quarter. As Nick mentioned in his commentary, Nav and the operations team have done an outstanding job in compressing cycle times and accelerating our drilling and completion activity. The accelerated operational results particularly on the completion side have pulled the timing of capital into Q3, and accelerated online dates for our two most recent pads.

As a result of our accelerated pace, we now have both — we now expect both annual production and capital a trend towards the higher end of the range is provided. Looking ahead to 2024, we expect to average annual production volumes of approximately 580 Bcfe. And as we discussed last quarter, we also expect total capital expenditures to fall beginning of 2024 through 2025 to around $500 million. We will provide the full 2024 guidance with our next quarterly update. To conclude, the sustainable business model that we have created is continuing to deliver value to our shareholders throughout the commodity cycle. Our focus for the remainder of 2023 will remain on safe and compliant execution to develop our extensive natural gas asset base, accelerating free cash flow growth from our New Technologies Business on consistent and clinical capital allocation to grow our long-term free cash flow per share, and most importantly, as always on ensuring all our decisions continue to reflect a long term owner mindset.

With that, I’ll turn it back over to Tyler for Q&A.

Tyler Lewis : Thanks, Alan. Operator if you can please open the call for questions at this time.

Q – Bert Donnes : Hi, good morning, guys. Thanks for taking my question. On the New Tech front, would you say the $75 million to $100 million ranges is kind of the low hanging fruit. I know you mentioned, there’s the potential for meaningfully higher free cash flow. Just wonder expand if that next leg up, requires government legislation or new partnerships or anything like that, or if the $75 million to $100 million can stair step quickly to that meaningfully higher free cash flow?

Ravi Srivastava: Hey, Bert. This is Ravi. So the $75 million to $100 million that we guided to we have a good line-of-sight on what we can accomplish next year. We’re not making, like government legislations and all those uncertainties into that guidance for next year. However, like, depending on how some of these things come out, there’s an opportunity to grow that beyond 2024. And as we talked about our Adams Fork project, their CCS opportunities, low feedstock sale opportunities, all that stuff is contingent on how that project progresses. So all that stuff adds to that meaningful growth opportunities in ’25 onwards, but next year, we have good line-of-sight on what we need to do to get to that $75 million to $100 number.

Bert Donnes : Okay. And then could you break out, maybe where you’ve, you’ve gotten so far, that $75 million to $100 million between — I think there’s three buckets that you kind of, you put that in and maybe the year-to-date range, whether or not that is you know which bucket that falls into and then just little small ones here. But does some of that have a macro pricing supply demand baked into it? Like if we saw a better environment for that, would that free cash flow range move? Or is the $75 million to $100 million more of a fixed outcome? Thanks.

Alan Shepard : Yeah, to your first question that’s primarily associated with the free cash flow as you’re kind of seeing generated being less two quarters, which is the environmental attributes. They make up the bulk of that expectation for next year. And, that’s the range we given there kind of includes some of the subjectivity to the pricing and those regulatory pathways that we already have line of sight on to Ravi’s points. So —

Ravi Srivastava: Right. I think some of that $75 million to $100 million is contemplated on where we see where the market is today. But just like any, if you’re in tune with, where some of these environmental attributes, pricing and all that stuff is, there is some level of fluctuation volatility in it. But we think that $75 million to $100 million is still achievable.

Bert Donnes : Got you. Thanks, guys.

Operator: The next question comes from Zach Parham with JPMorgan. Please go ahead.

Zach Parham : Yes, thanks for taking my question. Can you give us a little more color on the trajectory of the free cash flow from New Tech going forward? Do you expect another increase in 4Q? And does that get you to a ’24 run-rate? Or do you expect New Tech free cash flow to kind of continue to ramp through ’24? And then maybe based on what you see now, assuming no more governmental regulations or anything that come in, is that $75 million to $100 million a good run-rate for 2025?

Ravi Srivastava: Good question. What I would say is, I think it’d be easier, it’s better to guide on some of the stuff on an annual basis. There is some seasonality aspects of it that some quarter might be better, some quarter might be worse in terms of how, how it kind of ends up. So we’re going to try and stick to an annual guidance on this until there’s better clarity on how everything shakes out. There’s the different pathways that we’re pursuing, I think we’ll have much better clarity on this in the coming days. But at this point in time, our annual number is what we can best articulate. And, again, like based on the pathways that’s already created, 75 to 100, on an annual basis is something that we have a good line-of-sight on. And the goal for the team would be to continue to grow that in ’25 and beyond.

Zach Parham : Got it. Thanks for that color. I guess just one follow up also on New Tech. I know you mentioned most of the free cash flow at this point is coming from the methane capture and the environmental attributes associated with that. I think most of that’s coming from the Buchanan met coal mine. What’s the future runway on capturing gas there? I guess, do those gas volumes decline overtime? And maybe on the other side of that, are there still gas, is there still gas volumes that are being invented, that you could capture and potentially generate even more credits?

Ravi Srivastava: So I think that’s where some of the, when I talked about an annual guidance on some of these things. Those are some of the uncertainty factors on the mining base and some of their stuff that dictates what the volumes are. But I think there is — as for the runway for the mine, the mine has been operational for decades, and it has been in room for several more decades to go so and we have a capital invest infrastructure in place to continue to do that. So part of the $75 million to $100 million is consistent contingent on capturing that methane, that having a certain mining base that we have seen over the over the last several years. And there’s opportunity to do more beyond that particular mine itself. But that’s not contemplated in 2024.

Zach Parham : Got it. I guess, just one clarification there. The gas that you’re capturing now, we think about shale gas, shale gas declines overtime. Does the gas that you’re capturing now does it have a base decline rate? Is it pretty flat? Just trying to get a sense of, of the opportunities out there?

Ravi Srivastava: It’s a different play all together, so to speak. I think it’s more a function of, of mining pace and how fast the mine is operating as opposed to the decline from the well itself.

Zach Parham : Got it. Thanks, guys. Appreciate the color.

Operator: The next question comes from Leo Mariani with ROTH MKM. Please go ahead.

Leo Mariani : Yeah, just a quick follow up here on the New Tech business. So maybe just kind of looking at it a little different way. So we think about the $75 million to $100 million of New Tech free cash flow next year. Is that sort of contractually kind of underpinned for you folks? Are you selling, these credits kind of on a long-term basis. And maybe that, volume and this sort of price is kind of locked in. Or is this maybe just more, your own internal prediction of what you expect for next year?

Ravi Srivastava: Yeah. It’s more of our internal production of what we expect the pricing to be. There’s a mix of long-term contracts in certain arenas. And then there’s certain other programs where the pricing and volume kind of fluctuate in some of the arenas. It’s a mixed bag of those kinds of opportunities. But it’s — our $75 million to $100 million is based on where we see, how the different opportunities kind of shake out.

Leo Mariani : Okay, that’s helpful. And then just on, kind of the remainder of the year. I guess you guys are saying that CapEx in production are at the higher end here. As I’m looking at kind of year-to-date CapEx for the first three quarters. And I look at this right that you’ve got about $100 million left to spend in 4Q, which is kind of roughly half of what third quarter levels are. So are you seeing just limited operational activity in the fourth quarter? And similar question on the production. I mean, I can get kind of the, the high-end of the guide, but I guess that assumes that production can even come down a little bit in 4Q versus 3Q. I just want to verify that I’m kind of looking at these numbers, right, that you’d expect, like CapEx to be kind of cut in half in 4Q and any production tails off a little this quarter?

Alan Shepard: Yeah, that’s right. You’re going to see a significant decline in CapEx in Q4. What we talked about there during the commentary was the completion team, it’s just been so efficient that we pulled basically 11 of the 13 remaining fields in the second half the year came into Q3, that’s also driving kind of the production bump. But if you think about it, basically, we got one rig running. And we’ve kind of had to slow down to almost idle to frack crew, because we’ve been had a schedule. And we don’t want to push volumes into this market, given current prices. So we are just way ahead of schedule and you will see a big drop in Q4 capital next quarter.

Leo Mariani : Okay, now, that’s very helpful guys. And then just on the production, just to follow up there. So if I look at third quarter production, I mean, it looks like it’s around a 570 Bcf annual run-rate in 3Q, a little bit lower than your ’24 guide, of 580 Bcf. And I guess, production is coming down slightly here in fourth quarter. What’s the kind of plan? Is there a plan for early ’24, where you call this make it up but you’re ramping up activity on January 1st to try to get those volumes up to that 580 B level? Is that kind of the high level operating plan here to kind of get back after it right when the year turns?

Alan Shepard : And so if you think about the operating plan that we mentioned, we have a continuous drilling program ongoing, right. And it’s really just timing on the fracks, fracks is kind of biggest spend on the D&C side. So right now, we slowed down the completion activity, because we’re ahead of schedule. And next year, the 580 is going to come and go for the year. We’re not going to providing specific volume guidance quarter-by-quarter, but the way to think about it now, is we we’ve mentioned before, we’re trying to get to kind of this 1.59-1.6 run-rate, that’s where we’re at, and that’s where you should roughly expect to see volumes through next year.

Leo Mariani : Okay, thanks, guys.

Operator: The next question comes from Michael Scialla with Stephens. Please go ahead.

Michael Scialla : Yeah, hi. Good morning. Just one on the New Tech. Just trying to understand the revenue generation there. Most of the revenues or I guess, maybe all the revenues be, are they generated with the alternative energy credits associated with the power plant? Or are there any other credits that you are able to generate by abating the methane?

Ravi Srivastava: So this is Ravi. The EA opportunity that they’re pursuing, they are a combination of voluntary and compliance offset — compliance utility programs and AEPs. So there’s more to that. And then we expect to add forestry, carbon credits and wetland mitigation, a lot of other EAs to it. So there’s, it’s not just coming from one source. We have like pathways into multiple opportunities.

Michael Scialla : Okay, got it. And are you sharing any of those credits with anybody else or is it solely CNX that is getting those credits at this point?

Ravi Srivastava: I mean, those credits are monetized. I’m not — we’re not consuming them ourselves. I don’t understand the question.

Michael Scialla : Sorry, I just wondering if you are the only one abating the methane [multiple speakers] mine. So yeah, if you’ve generated the credits, I mean you can monetize them with another party. But you’re the only one that is abating methane at the plant?

Ravi Srivastava: Right? If you’re asking who the like there’s only working, one working interest partner in the project. That’s us.

Michael Scialla : Got it. Got it. Okay, very good. Looks like you’ve sold some production or sold some assets. I assume there was some production associated with that. Can you say what, what that was for the $19 million that you generating asset sales for the quarter?

Alan Shepard : Yeah. The bulk of that of selling spare parts. So again, we really do you guys, we have a deep inventory of leases throughout Appalachian. We’re to the point now where folks come to us for a lot of unit fill in, so we’re able to monetize some of these non-core assets acreage at pretty attractive prices. And we saw an upsurge of that in Q3. So it wasn’t production related. We did have the second part of the close on our assets sale for the non-up sale we did, but that was about $3 million in the 19. But the bulk of that is just from selling, selling from our deep inventory of leases.

Michael Scialla : No, good. Okay. And just last one for me, I wonder, any insight on what you think well cost might look like for ’24, relative to where they were this year?

Alan Shepard : I think if you’re asking about sort of oilfield services, inflation, things like that, we’re modeling everything to be pretty flat. We expect way downstream is going to we’ll see some operational efficiencies, improve cost, but we’re not modeling or thinking about any sort of major downdraft in oilfield service costs for next year.

Michael Scialla : Got it. Thank you.

Operator: The next question comes from Jacob Roberts with TPH. Please go ahead.

Jacob Roberts : Good morning.

Alan Shepard : Good morning.

Jacob Roberts : Just the effect of Buchanan Power facility. I’m curious if you could let us know how to think about the uptime of that plant or the runtime of that plant relative to the power pricing in the region?

Alan Shepard : I mean, that’s a peaker plant, right? It runs as called upon the PJM. So —

Jacob Roberts : Okay, but no, no guardrails in terms of what PJM pricing is, and when that is on or off?

Alan Shepard : That’s it’s all dictated by and sparked economics, right, like with the power prices relative to flowing gas to the plant to turn it on. So it’s just a traditional peaker plant, nothing unique about it.

Jacob Roberts : And then, relative to that feed gas. Is CNX the sole supplier of gas to the plant, and then longer term where the plant increased utilization, can CNX provide that supply in totality?

Ravi Srivastava: CNX is the sole supplier of gas to that facility at this point in time.

Alan Shepard : There’s volumes produced in that field beyond what that plant consumes.

Jacob Roberts : Perfect, appreciate the time.

Operator: The next question comes from John Abbott with Bank of America. Please go ahead.

John Abbott : Hey, good morning, and thank you for taking our questions. So with the New Technology business in the free cash flow guide that you provided here, I mean, how do you think about the potential impact to your credit rating going forward?

Alan Shepard : Yes, we’ve had those discussions yet. It’s not being incorporated. I think that probably credit guys usually wait for some more quarters on our belt before we give us credit for it. I think the one thing we did want to point out was that it will create some natural deleveraging, even before considering reductions in absolute debt.

John Abbott : Very, very helpful. And then also, again, with the free cash flow outlook that you provided there. I mean, it doesn’t seem like there’s any incremental CapEx spend on there. Is there incremental CapEx that we should be thinking about related to New Technology guide, as relates to copay methane abatement in 2024 and 2025?

Ravi Srivastava: Yeah, on ’24-’25, we do expect to spend some capital on the New Tech Group front, but not necessarily on the COVID coal mine methane abatement side of things.

John Abbott : I guess I guess you will get further clarity on that probably at year-end results here. But any idea in terms of what how should we should think about other capital for 2024?

Alan Shepard : Yeah. I mean, we’ll provide the full guidance breakout when we get to Q1, or sorry, January of 2024. But you should expect to see everything kind of decline from this year as we make our way towards that $500 million a year.

John Abbott : All right, great, helpful. Thank you very much.

Operator: The next question comes from Brian Velie with Capital One Securities. Please go ahead.

Brian Velie: Good morning, everybody really appreciate all the detail on New Tech. I have a couple of other questions that maybe to be able to answer and help me out a little bit. Just wondering if you can help me understand how much methane do you capture to earn one of the credits, like a single credit?

Ravi Srivastava: Not sure how to answer that question. But I think what I can tell you is, and we’ve provided details in our CSR, and our in our quarterly updates on we’re capturing out 6 million tonnes of CO2E of methane. And the different programs have different ways of monetizing that. So that’s why it’s difficult to answer specifically what your question was.

Brian Velie: Okay, I understand. So it sounds like just different conversion rates, depending on the program. And then I guess, probably answers, the next question. I was going to ask was, what was the credit price that you could sell these credits at that was assumed in the $75 million to $100 million budget, or I’m sorry, free cash flow range for next year. But I assume that those price assumptions vary also by program?

Ravi Srivastava: That’s correct.

Brian Velie: Okay, one last question —

Alan Shepard : That’s based on kind of the current market.

Brian Velie: I’m sorry, say that one more time. Apologies.

Alan Shepard : That’s why we provided the range and then the expected range is based on kind of the current market condition. Yeah.

Brian Velie: Perfect. And then last question, this is pretty very interesting stuff. I don’t know anybody else is talking about this in the E&P space, I assume maybe the way you’re able to do this is, your past experience in the coal industry and relationships that you have there, is that a unique strategic advantage that you expect really only you will be able to exploit? Or is that something you expect other people to kind of follow on and start doing similar things?

Ravi Srivastava: I think it’s a combination of both. I think there’s other people who can do this. But we have developed some technology around capturing waste methane most effectively. Like there’s some skill that goes into it. And we think we have the upper hand there.

Brian Velie: Got it. Thanks very much for the color. Really appreciate all the details on New Tech. All the best.

Operator: The next question comes from Nitin Kumar with Mizuho. Please go ahead.

Nitin Kumar: Hey, good morning, guys. Obviously, a lot of interest in the New Tech, and deservedly. So I guess my question is are the current free cash flows, are they only from Pennsylvania credits? Or are you getting anything from other states? And is it all kind of current time or are you monetizing any cruel credits from your past activities?

Ravi Srivastava: So I think I already answered this question, where not all the revenues coming from Pennsylvania program that you mentioned. And on the accrual side of things, I think most of these programs where they have a timeline on how much you can accrue? So there is — it’s not from previously accrued, whatever is permitted by the program.

Alan Shepard : Generally concurrent, the way to think about it. Yeah.

Nitin Kumar: Okay. That’s helpful. And then I guess we’re going back to the regular gas side of things. My question was really around, it seems like you’re dropping a little activity. I know, you put some CapEx into third quarter. Not looking for formal guidance, but there is a pretty significant step up in production in in 2024, based on the outlook that you’ve provided. So I’m just curious, is this — is there any sort of cadence of activity that you expect for ’24? Is it going to be front half weighted or back half weighted? Just looking at strip and trying to understand how you’re planning for the year in terms of timing?

Alan Shepard : Yeah, I mean, like I mentioned earlier. There’s nothing in particular worth highlighting regarding like the quarter-to-quarter cadence. The way to think about just that we’re doing 580. And we’ve targeted this sort of run-rate we’re at so it should just fluctuate around that a little bit. And, in this year, you know, we had a lot of capital to build up from called the 555 to the 580 next year. So once we’re back to that maintenance production of 580, that’s going to be the driver of the capital declining, right.

Nitin Kumar: Okay, I’m going to sneak one more, and I’m sorry. But for some of those who are following for a while you’re coming I think you’ve highlighted you’re in the fourth year of your maintenance of production plan, that this is a concentrated plant in the specific area. When you start expect to start unlocking the other inventory in your portfolio and start spending some of the midstream CapEx that was associated with that?

Alan Shepard : Yeah, we’re still a few years out from unlock anything, we still have a nice chunk of Southwest VA to develop. I think you can see in the program we are lacing in kind of a CPA [ph] Utica well here in there. As those results become available, we’ll highlight those in the materials moving forward. But we’re still a few years after meeting any sort of major infrastructure investment in a new area.

Nitin Kumar: Thanks, guys.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tyler Lewis, for any closing remarks.

Tyler Lewis : Great. Thank you, everyone, for joining this morning and thank you for your interest in CNX. Please feel free to reach out if anyone might have any additional questions. Thanks.

Operator: Thank you. The conference has now concluded. You may now disconnect.